Will Najib’s SCIT appeal be undermined by bankruptcy action?

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Najib's SCIT Appeal Could Be Rendered Meaningless by Bankruptcy Action

Tan Sri Shafee Abdullah, representing Datuk Seri Najib Razak, argued before the Court of Appeal that allowing the Inland Revenue Board (LHDN) to proceed with its bankruptcy case against the former prime minister would render Najib's appeal before the Special Commissioners of Income Tax (SCIT) in September "meaningless." Shafee likened the situation to "entering the boxing ring with both hands tied," emphasizing that a bankruptcy declaration would strip Najib of control over his assets and bar him from various activities, placing them under the authority of the director-general of insolvency. The core of the dispute involves an additional tax assessment of RM1.69 billion for the period between 2011 and 2017, which Najib contends is related to an RM8 billion donation he states was used for political and welfare purposes.
Arguments Against Proceeding with Bankruptcy

Shafee Abdullah asserted that if the LHDN's bankruptcy case against Najib is not stayed, it would pre-emptively undermine Najib's ability to effectively pursue his appeal at the SCIT. He highlighted that a bankruptcy declaration would impose severe restrictions, preventing Najib from engaging in numerous activities and divesting him of control over his financial assets, which would then be managed by the insolvency director-general. This, he argued, would render the subsequent tax appeal process moot.
LHDN's Position on "Pay First, Talk Later"

The LHDN, through senior revenue counsel Norhisham Ahmad, countered that there are no "special circumstances" warranting a stay of proceedings. The board's stance is supported by a Federal Court ruling from October 2023, which affirmed the principle of "pay first, talk later." This established legal precedent dictates that tax assessments must be settled regardless of any pending appeals or challenges.
High Court's Previous Dismissal of Stay Applications

This Court of Appeal hearing follows a High Court decision on November 17 last year. On that occasion, the High Court dismissed similar applications filed by Najib and his son, Nazifuddin, seeking to stay bankruptcy proceedings. These applications were related to unpaid tax arrears of RM1.69 billion for Najib and RM37.6 million for Nazifuddin, with the court affirming that active appeals do not exempt taxpayers from recovery actions.
Najib's Ongoing Challenge to Tax Assessments

Najib is actively challenging two bankruptcy notices, arguing that the tax assessments themselves are flawed. These assessments have increased from an initial RM1.46 billion to RM1.69 billion due to the imposition of penalties and interest. Najib maintains that these assessments should not be enforced while the underlying legal proceedings related to the tax dispute remain unresolved. The Court of Appeal has scheduled September 4 for its decision on the matter.

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Will Najib’s SCIT appeal be undermined by bankruptcy action?

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